Organizations and Structures

Module 7
LIS 580: Spring 2006
Instructor- Michael Crandall

Roadmap

Organizing and organizations

Structure of organizations
Matrix organizations
Networked organizations
Learning organizations
Challenges in organizations

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What Is Organizing?
Organizing
Arranging the
activities of the
enterprise in such
a way that they
systematically
contribute to the
enterprises goals.

G.Dessler, 2003

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Depicting the Organization

Organization Chart
A chart that shows the
structure of the
organization including
the title of each
managers position
and, by means of
connecting lines, who
is accountable to
whom and who has
authority for each area.
G.Dessler, 2003

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Organization Chart
In f o r m a tio n S e r v ic e s G r o u p
K n o w le d g e A r c h i t e c t u r e M a n a g e r
K n o w le d g e A r c h i t e c t u r e L e a d
C u s to m e r L ia is o n
C a ta lo g e r
C a ta lo g e r

S e a r c h /S y s te m s L e a d
D e v e lo p e r

D e s ig n L e a d
A s s is ta n t D e s ig n e r

D e v e lo p e r
S y s t e m s A d m in

T a x o n o m y D e s ig n e r

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Organization Design and

Structure
Organization design
A process in which managers develop or
change their organizations structure

Work specialization
A component of organization structure that
involves having each discrete step of a job
done by a different individual rather than
having one individual do the whole job
Prentice Hall, 2002

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Economies of Work
Specialization

Prentice Hall, 2002

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Stages of Organizational
Development
Simple structure
An organization that is low in specialization
and formalization but high in centralization

Functional structure
An organization in which similar and related
occupational specialties are grouped
together

Divisional structure
An organization made up of self-contained
units

Prentice Hall, 2002

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Stages of Organizational
Development (contd)
Matrix structure
An organization in which specialists from functional
departments are assigned to work on one or more
projects led by a project manager

Team-based structure
An organization that consists entirely of work
groups or teams

Boundaryless organization
An organization that is not defined or limited by
boundaries or categories imposed by traditional
structures

Prentice Hall, 2002

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Mechanistic and Organic

Organizations
Mechanistic organization
The bureaucracy; a structure that is high in
specialization, formalization, and
centralization

Organic organization
An adhocracy; a structure that is low in
specialization, formalization, and
centralization

Structure follows strategy

Prentice Hall, 2002

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Burns and Stalker

G.Dessler, 2003

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Structure Variables
Principles

Departmentalization

Chain of command
Span of control
Authority
Power
Responsibility

Functional
Divisional

Product
Customer
Geographic
Process

Prentice Hall, 2002

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Organizational Structure: Control

Chain of command
The management principle that no person should report to
more than one boss

Span of control
The number of subordinates a manager can direct efficiently
and effectively

Authority
The rights inherent in a managerial position to give orders
and expect them to be obeyed

Responsibility
An obligation to perform assigned activities

Power
An individuals capacity to influence decisions
Prentice Hall, 2002

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Chain of Command

Prentice Hall, 2002

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Tall And Flat Organizations, And

The Span Of Control
Span of Control
The number of subordinates reporting directly to a
supervisor.
Wide spans: larger number of direct reports.
Narrow spans: fewer number of direct reports.

Tall vs. Flat Organizations

Tall organizations: more management layers and
more hierarchical controls.
Flat organizations: fewer management layer and
decision making closer to the customer.
G.Dessler, 2003

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Spans of Control in Country-Based

Organization

FIGURE 69
G.Dessler, 2003

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Types of Organizational Authority

Line authority
The position authority (given and defined by
the organization) that entitles a manager to
direct the work of operative employees

Staff authority
Positions that have some authority (e.g.,
organization policy enforcement) but that
are created to support, assist, and advise
the holders of line authority
Prentice Hall, 2002

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Authority Versus Power

Prentice Hall, 2002

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Types of Power
Legitimate

Power based on ones position in

the formal hierarchy

Coercive

Power based on fear

Reward

Power based on the ability to

distribute something that others
value

Expert

Power based on ones expertise,

special skill, or knowledge

Referent

Power based on identification

with a person who has resources
or traits

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Checklist 7.3
Principles of Delegation
The manager can delegate authority but cannot
delegate responsibility.
Clarify the assignment.
Delegate, dont abdicate.
Know what to delegate.
Specify the subordinates range of discretion.
Authority should equal responsibility.
Make the person accountable for results.
Beware of backward delegation.
G.Dessler, 2003

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Departmentalization:
Creating Departments
Departmentalization
The process through which an
organizations activities are grouped
together and assigned to managers; the
organizationwide division of work.

G.Dessler, 2003

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Departmentalization
Functional
The grouping of activities by functions performed

Product
The grouping of activities by product produced

Customer
The grouping of activities by common customers

Geographic
The grouping of activities by territory

Process
The grouping of activities by work or customer flow
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Organizing Departments by
Function
Functional Departmentalization
A form of organization that groups a
companys activities around essential
functions such as
manufacturing,
sales, or finance.

G.Dessler, 2003

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Functional Departmentalization

FIGURE 61
G.Dessler, 2003

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Organizing Departments by SelfContained Divisions/Purposes

Product Departmentalization
Grouping departments around a firms
products or services, or each family of
products or services; also referred to as a
divisional organization.

Customer Departmentalization
Self-contained departments are organized
to serve the needs of specific groups of
customers.
G.Dessler, 2003

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Divisional Organization
for a Pharmaceuticals Company

FIGURE 62
G.Dessler, 2003

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Customer Departmentalization,
Grayson Steel Company

FIGURE 63
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Organizing Departments by SelfContained Divisions/Purposes (contd)

Marketing-channel Departmentalization
Departments focus on particular marketing
channels, such as drugstores or grocery
stores.

Geographic (Territorial)
Departmentalization
Separate departments are established for
each of the territories in which the
enterprise does business.
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Marketing Channel
Departmentalization

FIGURE 64
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Divisional Organizations
Facilitate Coordination

FIGURE 65
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Checklist 6.1
Functional vs. Divisional Organizations
Functional Organization Advantages
1.
2.
3.
4.

It is simple, obvious, and logical.

It fosters efficiency.
It can simplify executive hiring and training.
It can facilitate the top managers control.

Functional Organization Disadvantages

1. It increases the workload on the executive to
whom the functional department heads
report.
2. It may reduce the firms sensitivity to and
service to the customer.
3. It produces fewer general managers.
G.Dessler, 2003

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Checklist 6.1 (contd)

Functional vs. Divisional Organizations
Divisional Organization Advantages
1. The product or service gets the singleminded attention of its own general
manager and unit, and its customers
may get better, more responsive
service.
2. Its easier to judge performance.
3. It develops general managers.
4. It reduces the burden for the
companys CEO.
G.Dessler, 2003

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Checklist 6.1 (contd)

Functional vs. Divisional Organizations
Divisional Organization
Disadvantages
1. It creates duplication of effort.
2. It may diminish top managements
control.
3. It requires more managers with
general management abilities.
4. It can breed compartmentalization.
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Creating Matrix Organizations

Matrix Organization
An organization structure in which
employees are permanently attached to
one department but also simultaneously
have ongoing assignments in which they
report to project, customer, product, or
geographic unit heads.

G.Dessler, 2003

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Matrix Organization
Departmentalization

FIGURE 66
G.Dessler, 2003

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Matrix Organizations
Advantages
Access to expertise.
Stability of
permanent
department
assignments for
employees.
Allows for focus on
specific projects,
products, or
customers.

Disadvantages
Confusion of
command.
Power struggles and
conflicts.
Lost time in
coordinating.
Excess overhead for
managing matrix
functions.
G.Dessler, 2003

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Departmentalization in Practice:
A Hybrid
Why mix the types of departmentalization?
Hierarchical considerations
The relationship of top level departments to their
subsidiary departments.

Efficiency
Product, customer, and territorial departments tend to
result in duplicate sales, manufacturing, and other
functional departments.

Common sense
Departmentalizing is still more an art than a science.
G.Dessler, 2003

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The New Summer Tour Organization

FIGURE 68
G.Dessler, 2003

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Network-based Organizations
Organizational Network
A system of interconnected or cooperating
individuals.

Informal Networks
Communication pathways and relationships
between individuals in an organization that
do not necessarily conform to the formal
chain of command and communication
networks of an organization.
G.Dessler, 2003

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Network-based Organizations
(contd)
Formal Organizational Network
A recognized group of managers or other
employees assembled by the CEO and the
other senior executive team, drawn from
across the companys functions, business
units, geography, and levels.

Electronic Organizational Networks

Networking through technology-supported
devices such as e-mail, video-conferencing,
and collaborative computing software like
Lotus Notes.
G.Dessler, 2003

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Formal vs. Social Structure

Rarely do the
communication
patterns match the
formal structure

Cross, Rob. A bird's-eye view: Using social network analysis

to improve knowledge creation and sharing. IBM Executive
strategy report 04Jun2002
http://www-1.ibm.com/services/us/index.wss/xs/imc/a10012
62
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Network-based Organizations
(contd)
Team-Based Organizations
Team
A group of people committed to a common purpose, set
of performance goals, and approach for which they hold
themselves mutually accountable.

Horizontal Corporations
A structure that is organized around customeroriented processes performed by multidisciplinary
cross-functional teams rather than by formal
functional departments.
G.Dessler, 2003

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The Horizontal Corporation

Source: John A.
Byrne, The Horizontal
Corporation, Business
Week, 20 December
1993, p. 80.

April 18, 2006

FIGURE 611
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Checklist 6.2
Building Horizontal Organizations

Make responsibilities overlap. Design

individual jobs as broadly as possible, and
keep the number of job titles to a minimum.
Base rewards on unit performance to
emphasize the importance of working
together.
Change the physical layout to promote
collective responsibility. Let people see each
others work.
Redesign work procedures, provide computer
terminals, use the e-mail network, and make
sure managers are available.
G.Dessler, 2003

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How to Create a Horizontal

Corporation

Source: Source: Reprinted from the December 20, 1993, issue of Business Week
by special permission. Copyright 1993 by the McGraw-Hill Companies, Inc.

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FIGURE 612
G.Dessler, 2003

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Other Organization Types

Federal Organization
An organization in which power is distributed
between a central unit and a number of
constituents, but the central units authority is
intentionally limited.

Virtual Organization
A temporary network of independent companies
that use information technology to share skills,
reduce costs, and provide access to one anothers
markets.
Its success depends on each of the individual
firms responsibility and self-interest to accomplish
the networks purpose.
G.Dessler, 2003

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Effect of Technology on Structure

G.Dessler, 2003

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When Organizing:
Always Keep Your Goals in Mind
Business environments are in a constant state
of change.
An organizations strategy must be adapted to
changes in its competitive environment.
Structure follows strategy.
Strategic change creates the need for restructuring
the organization to acquire new and different
knowledge, skills and abilities.
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Checklist 7.1
What Determines Organization Structure
Environment. Fast-changing environments
require organic structures; slowly changing
environments favor mechanistic structures.
Technology. Unit and continuous production
processes favor organic structures. Mass
production processes favor mechanistic structures.
Goals. Ask, What are the main goals we want to
achieve via this organization?
Pros and cons. Each approach to
departmentalization has pros and cons.
Logic and common sense.
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What Are Learning

Organizations?
1. Adopt an organic, networked organizational
form.
2. Encourage their employees to learn and to
confront their assumptions
3. Have employees who share a common vision
4. Have the capacity

to adapt to unforeseen situations

to learn from their own experiences
to shift their shared mindsets
to change more quickly, broadly, and deeply than
ever before.
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Organizational Learning as a
Dynamic Process

Crossan, Lane, & White (1999)

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Abolishing Organizational
Boundaries
Boundaryless Organization
An organization in which management
strips away the walls which typically
separate organizational functions and
hierarchical levels, through
the widespread use of
teams, networks, and
similar structural
mechanisms.
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The Four Organizational Boundaries

That Matter

Source: Reprinted by permission of Harvard Business Review. The Four Organizational Boundaries that Matter,
from The New Boundaries of the Boundaryless Company, by Larry Hirschorn and Thomas Gilmore, MayJune
1992. Copyright 1992 by the President and Fellows of Harvard College. All rights reserved.

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FIGURE 03
G.Dessler, 2003

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Managing Learning Organizations

How to Streamline Organizational Decision
Making
Downsize
Reduce management layers
Establish miniunits

How to Cultivate Employees Personal

Mastery
Provide continuous learning opportunities.
Foster inquiry and dialogue.
Establish mechanisms to ensure that the
organization is continuously aware of and can
interact with its environment.
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Challenges in Organization
Merging separate organizations with different
structures
Changing an existing organization to meet
external or internal changes in conditions
Conflicts between departments or groups
Interdependence between organizational units
Centralization vs. decentralization

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Part of the Independent Integrator Challenge

Facing the Homeland Security Director

Source: Alison Mitchell, Disputes Erupt over Ridges Needs

for His Job, New York Times, 9 November 2001, p. B7.

April 18, 2006

FIGURE 75
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Methods for Achieving

Coordination
Mutual Adjustment
Achieving coordination
through face-to-face
interpersonal
interaction.

Use Rules and

Procedures
Standardize
Exercise Direct
Supervision: Use the
Chain of Command
Divisionalize

Appoint Staff
Assistants
Appoint Liaisons
Appoint Committees
Organize Independent
Integrators
An individual or a group
that coordinates the
activities of several
interdependent
departments, but is
independent of them.
G.Dessler, 2003

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Managing Organizational Conflict

LineStaff Conflict
Disagreements between a line manager
and the staff manager who is giving him or
her advice.

How to Organize to Reduce Interunit

Conflict
Appeal to power and
the chain of command
Reduce interdependence
Exchange personnel
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Types of Interdependence

Source: Based on James Thompson, Organizations in Action

(New York: McGraw-Hill, 1967), Chapter 2.

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FIGURE 76
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Centralization and
Decentralization
Centralization
A function of how much decision-making
authority is pushed down to lower levels in
an organization; the more centralized an
organization, the higher the level at which
decisions are made

Decentralization
The pushing down of decision-making
authority to the lowest levels of an
organization
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Decentralize?
Decentralized Organization
Organizational authority for most departmental
decisions is delegated to the department heads.
Control for major companywide decisions is
maintained at the headquarters office.

Decentralization Rules:
Decentralize decisions that affect only one division
or area and that would take a long time for upper
management to make.
Centralize decisions that could adversely affect the
entire firm and that upper management can fairly
quickly and easily.
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Problems With Size

There is a fairly common perception that large organizations tend to
behave much less intelligently than their size suggests. They often
lose the decisiveness seen in small groups and may seem "stupid" to
people within them who work with ideas and knowledge.
There appears to be a fundamental upper limit on the average per
capita decision rate that an organization can sustain, depending
inversely on the organization's entropy. If the limit is broached,
impaired productivity among knowledge managers may result and
large organizations may be disadvantaged when performing
knowledge-intensive tasks that require efficient use of intellectual
capital.
Janow, R. Shannon Entropy and Productivity: Why Big Organizations Can Seem Stupid. Analytic Solutions Group, LLC. 2/28/2004
http://physics.njit.edu/~janow/Paper20040228njit.pdf

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Hammer vs. Deming

What tradeoffs did Deming and Hammer make
in their approaches to designing
organizations?
Did you notice who was given power in
Demings approach vs. Hammer?
What is driving NYNEX to make changes in
their organization structure?
What component of the organization is hardest
to change?
Do you see the same issues arising in the
War at Work article?
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Next Time

Managing People
Read Chapter 9 (not 8!!) and the articles

Discussion group questions:

How can relations be improved between Stanley
and the reference librarians?
How, without simply complaining about Stanley,
can you persuade Joanna to listen to the
reference departments perspective?
Who defines the responsibilities of each
department, and how can you, as an interested
party, help accomplish this?

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